October 18, 2021
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$25,000 – $10,000,000+
Starting at 7.25%
Less than 30 days
FAQ About Inventory Financing
What is inventory financing?
Inventory financing is a specific type of asset-based financing or funding product that allows businesses to secure financing through the value of a business’ inventory to make inventory purchases. This type of funding helps the cash flow of a business by freeing up existing working capital that was being used to purchase and hold inventory. This potential to add liquidity allows businesses to capitalize on the value of their inventory. Instead of using up their working capital for inventory, businesses that take advantage of inventory financing capitalize on the value of the inventory used to keep their shelves stocked.
How do you qualify for inventory financing?
The determining factors that influence the qualifying status of a business for inventory financing are the industry that the business is in and the type of inventory that is being pledged as collateral. Lenders need to determine the value of the inventory in the event that the borrowing business is not able to pay back the loan and the inventory needs to be sold to a third party. The value of the inventory that will be purchased itself is usually what the lender uses as collateral to secure the funds – the higher the value of the inventory being used for collateral, the more money that the borrowing business will receive from the lender.
How long does the application process take for inventory financing?
Although the application process may require a surplus of documents, the timeframe to secure inventory financing is typically not very lengthy. The timeframe is often dependent on the preparation of the applicant business, if the business owner has the necessary documents readily available, the application process will usually be much quicker. Recently, with the increase of Internet services that offer inventory finance options, finding the right inventory financing loan is easier than ever. One factor that might influence the speed of application decisions is the type of inventory being purchased. The inventory lender must complete a field audit to assess the value of the inventory, the time frame might be extended before the borrowing business obtains a decision.
How would you use inventory financing?
Businesses use inventory financing to free up cash flow that is held up via inventory that has yet to be sold. This type of financing is especially beneficial for businesses that turn over high quantities of especially valuable inventory because it allows businesses to receive funds immediately based on the value of the inventory on their shelves and the inventory they are attempting to purchase for the future. Inventory financing is used to cover different expenses that may arise and allows business owners to take advantage of new business opportunities by providing an influx of working capital immediately.
Is collateral required for inventory financing?
Yes, inventory financing is a specific asset-based lending product. The collateral required for inventory financing is the inventory that the loan is being secured with. The type of inventory being used as collateral and the liquidation cost of the inventory both play a large role to determine the necessary collateral.
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